Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly lower with the Euro Stoxx 50 down -0.31% and Mar S&Ps down -4.90 points. The dollar and Treasuries rose, while stocks and commodities weakened on concern Greece will fail to reach an agreement that would allow it to receive a second bailout from international creditors. Greek Prime Minister Papademos struck a tentative deal with political parties to extend spending cuts after Euro-Zone finance chiefs told them an increase in the 130 billion-euro aid package wasn't forthcoming, while Fitch Ratings said a Greek disorderly default "cannot be wholly discounted." The euro also weakened against the dollar after German Chancellor Merkel said "time is running out" for Greek leaders to meet the conditions of the troika for additional bailout funding. Limiting losses in European stocks was the +10,o point increase in the Feb Euro-Zone Sentix investor confidence to -11.1, greater than expectations of +4.6 to -16.5 and its strongest level in 7 months, while Dec German factory orders Rose +1.7% m/m and unchanged y/y, stronger than expectations of +1.0% and -0.4% y/y.
- Asian stocks today closed mostly higher with Japan up +1.10%, China -0.07%, Australia +1.05%, South Korea +0.15%, India +0.58%. Asian stocks settled mostly higher after Friday's U.S. payrolls report bolstered optimism that rising employment in the U.S. will boost exports from Asia. Japanese carmakers rallied and helped to lift the Nikkei 225 Stock Index to a 2-month high after Toyota forecast sales will climb 21% this year as production recovers following disruptions caused by natural disasters in Japan and Thailand last year. The yen slipped to a 1-week low against the dollar after BOJ Governor Shirakawa told the Japanese parliament that the nation's economic condition is "severe" because of deflation and the strong yen and that the BOJ is implementing monetary measures and will take appropriate steps as needed. The prospects for additional interest rate cuts from the RBA increased after Jan Australian retail sales unexpectedly fell -0.1% m/m, its first decline in 6 months and weaker than expectations of a +0.2% m/m increase. The IMF warned today that if the European debt crisis worsens, China's economic growth could drop by as much as 4 percentage points from its current projection of 8.2% GDP growth this year and that would warrant "significant" fiscal stimulus from the government.
- March S&Ps this morning are trading down -4.90 points. The US stock market Friday settled sharply higher on increased economic optimism after Jan U.S. non-farm payrolls rose more than expected, the unemployment rate unexpectedly fell and the U.S. service sector in Jan expanded more than forecast: Dow Jones +1.23%, S&P 500 +1.46%, Nasdaq Composite +1.61%. The S&P 500 climbed to a 6-1/2 month high, the Dow rose to a 9-month high and the Nasdaq posted a 10-3/4 year high. Bullish factors on Friday included (1) the +243,000 increase in Jan non-farm payrolls, bigger than expectations of +145,000 and the largest gain in 20 months, (2) strength in manufacturing stocks after Jan U.S. manufacturing payrolls rose by +50,000, bigger than expectations of +13,000 and their biggest increase in a year, (3) the unexpected decline in the Jan U.S. unemployment rate to its lowest level in 3 years (-0.2 to 8.3% versus expectations of no change at 8.5%), and (4) the larger-than-expected increase in the Jan ISM non-manufacturing index which expanded at its fastest pace in 11 months (+3.8 to 56.8 versus expectations of +0.6 to 53.2).
- Bearish factors included (1) concern over a slowdown in the European economy after Dec Euro-Zone retail sales unexpected declined for a second month and (2) the ongoing Greek debt-swaps talks that still have no resolution, which raises concern over a Greek default.
- March 10-year T-notes this morning are up +4.5 ticks. T-note prices on Friday plunged as stronger-than-expected U.S. economic data on payrolls and the service sector educed safe-haven demand for Treasuries and raised inflation concerns: TYH2 -27.0, FVH2 -10.7, EDM2 -1.0. Bearish factors Friday included (1) the +243,000 increase in Jan non-farm payrolls, bigger than expectations of +145,000 and the largest gain in 20 months, (2) the unexpected decline in the Jan U.S. unemployment rate to its lowest level in 3 years (-0.2 to 8.3% versus expectations of no change at 8.5%), (3) the larger-than-expected increase in the Jan ISM non-manufacturing index which expanded at its fastest pace in 11 months (+3.8 to 56.8 versus expectations of +0.6 to 53.2), and (4) long liquidation in Treasuries as the surge in the S&P 500 to a 6-1/4 month high reduced the safe-haven demand for U.S. government debt. A bullish factor was an increase in safe-haven demand for Treasuries on concern over a Greek default as the ongoing Greek debt-swap talks still have no resolution.
- The dollar index this morning is stronger with the dollar/yen unchanged and the euro/dollar -0.96 cents. The dollar index on Friday erased early losses and settle little changed after stronger than expected U.S. economic data on payrolls and the service sector reduces the chance of the Fed providing additional dollar negative stimulus measures: Dollar Index -0.067, USDJPY +0.367, EURUSD +0.00159. Bullish factors included (1) the +243,000 increase in Jan nonfarm payrolls, the biggest gain in 20 months, along with the unexpected decline in the Jan U.S. unemployment rate to a 3-year low of 8.3%, which reduces the chance of the Fed providing additional dollar negative stimulus measures and (2) the unexpected decline in Dec Euro-Zone retail sales for a second month, which is euro negative. Bearish factors Friday included (1) the surge in the S&P 500 to a 6-1/2 month high, which reduced the safe-haven demand for the dollar and (2) the larger-than-expected increase in the Jan ISM non-manufacturing index to its fastest pace in 11 months, which shows the economy continuing to expand and curbs the safe-haven demand for the dollar.
- Mar crude oil prices this morning are down -88 cents a barrel and Mar gasoline is -0.67 of a cent per gallon. Crude oil and gasoline prices on Friday settled higher on economic optimism after the Jan U.S. unemployment rate unexpectedly fell to a 3-year low and the Jan ISM non-manufacturing index surged to an 11-month high: CLH12 +$1.48, RBH12 +4.55. Bullish factors included (1) the biggest monthly increase in U.S. payrolls in 20-months (+243,000) along with the unexpected drop in the U.S. unemployment rate to a 3-year low of 8.3%, which suggests improvement in the economy that is positive for the oil demand picture, (2) the larger-than-expected increase in the Jan ISM non-manufacturing index to its best level in 11 months, which bolsters confidence in the economic outlook and fuel demand, and (3) increased geopolitical concerns after a Washington Post article said U.S. Defense Secretary Panetta believes there is a strong likelihood of a Israeli military strike on Iran by the end of June to thwart Iran's nuclear program. Bearish factors included (1) strength in the dollar, which discourages investment demand in commodities and (2) the unexpected decline in Dec Euro-Zone retail sales, which indicates economic weakness that is negative for energy demand.
Global Financial Calendar
| Monday 2/6/12 | |
|---|---|
| United States | |
| 0855 ET | St. Louis Fed President James Bullard speaks on inflation targeting in the U.S. at the Union League Club of Chicago. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1215 ET | Dallas Fed President Richard Fisher speaks to the Institute of International Finance on the economic and monetary outlook. |
| Euro-Zone | |
| 0430 ET | Feb Euro-Zone Sentix investor confidence expected +4.6 to -16.5, Jan +2.9 to -21.1. |
| Germany | |
| 0600 ET | Dec German factory orders expected +1.0% m/m and -0.4% y/y, Nov -4.8% m/m and -4.3% y/y. |
| Canada | |
| 1000 ET | Jan Ivey purchasing managers index expected -6.5 to 57.0, Dec +3.6 to 63.5. |
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